Stocks move higher after Bernanke talk

By Ellen Simon
Associated Press

NEW YORK » Stocks rose modestly yesterday after investors bobbed and weaved with every word of new Federal Reserve Chairman Ben Bernanke's testimony before Congress.

The market seesawed through Bernanke's first monetary policy testimony before the House Financial Services Committee. Stocks fell as he warned of more rate hikes, rose as he reassured investors about the spread between long- and short-term bond yields, then turned mixed as he expressed concern about Federal budget deficits. The major indexes crept upward after his debut ended.

Bernanke said inflation is contained, but warned it could tick higher. He left the door open to future interest rate increases. He was upbeat about the U.S. economy, saying the latest employment and consumer spending data "suggests that the economic expansion remains on track."

The market has recently been hypersensitive to any hints about future Fed rate hikes, said Brian Gendreau, investment strategist for ING Investment Management. Bernanke's testimony suggests that "if the Fed is going to err, it will be on the side of more rate hikes," Gendreau said.

Advancing issues outnumbered declining issues by roughly 2 to 1 on the New York Stock Exchange.

Stocks may continue to sway until it becomes clear when the Fed will stop raising interest rates, said Richard Madigan, global investment strategist at JP Morgan Private Bank. "There's a jumpiness in the markets that we're going to, unfortunately live with a little while longer," he said.

The market had opened lower as strong data from the manufacturing sector resurrected investors' fears that the Fed could hike rates past 5 percent, which would exceed Wall Street's expectations.

Federal Reserve industrial production data showed manufacturing rising in January; manufacturing data for both December and November was revised upward. The latest Empire State Manufacturing index, a measurement of New York's manufacturing sector and a barometer for the rest of the nation, also came in above economists' expectations.